Resurs Bank Year-end Report January—December 2018

“We ended 2018 with continued profitable growth and a strong trend in underlying earnings. All in all for 2018, we can present our best ever full-year earnings.” Kenneth Nilsson, CEO Resurs Bank AB

1 July—31 December 2018*

Lending to the public rose 16% to SEK 27,957 million

Operating income increased 13% to SEK 1,692 million

Operating profit increased 5% to SEK 743 million

C/I before credit losses was 39.6% (38.6%)

The credit loss ratio was 2.0% (1.8%)

1 January—31 December 2018*

Lending to the public rose 16% to SEK 27,957 million

Operating income increased 12% to SEK 3,293 million

Operating profit increased 7% to SEK 1,437 million

C/I before credit losses was 40.1% (40.1%)

The credit loss ratio was 2.1% (1.8%)

Statement by the CEO

We ended 2018 with continued profitable growth and a strong trend in underlying earnings. Lending rose 16 per cent year-on-year to SEK 28 billion. Growth remained strong in both segments and in all geographic markets. We are growing faster than the market and thus continuing to successively increase our market shares. However, earnings in the second half of the year were burdened by the general turmoil in the capital markets, which led to a lower valuation of our bond portfolio. We also incurred expenses of about SEK 10 million associated to completing the merger with yA Bank. Adjusted for these effects, operating profit increased 8 per cent compared with the year-earlier period.

For the full-year 2018 we can present our best ever earnings. We achieved this due to our profitable growth that is based on responsible credit lending and continued good cost control. The scalability of the operations has meant that the cost/income ratio has continued to improve despite higher investments in marketing and IT.

New digital solutions generated positive growth for the company

Both segments performed well during the half-year, largely driven by the digital solutions that were launched during the year. In retail finance, we received a positive response to our Click & Collect omni-channel solution that we launched in the third quarter and we are engaged in dialogue with several new retailers that have shown an interest in this service. In Supreme Card, we can see positive results of our work on artificial intelligence (AI) launched in the autumn. The algorithms mean that we can more quickly and with better precision identify behaviour patterns among our existing customers and thus tailor attractive activities and offers. We will refine these algorithms and work methodology in 2019 and implement AI in other parts of the business.

Our proprietary credit engine made a strong contribution to growth in Consumer Loans. For us, it is a new tool with which to cultivate the market and we are continuously working on integrating it into the operations. As a result, we adjusted our prices in Sweden at the start of the third quarter, which led to higher lending growth but margins that were too low in relation to our targets. In the third quarter, we adjusted the pricing in the credit engine and, as expected, this led to rising margins on new lending in the fourth quarter. At the same time, the segment’s total NBI margin was negatively impacted by mix changes.

We are driven by launching innovative solutions that create value for our retail finance partners and customers. We launched the Resurs Bank app in the autumn that makes everyday life easier for our customers, such as paying invoices easily. With this launch, we are further optimising the customer journey and enhancing the customer experience when banking with us, or when shopping with one of our retail finance partners.

Strategic initiatives strengthen capital position

During the year, we worked on a number of strategic initiatives to optimise our capital and liquidity situation. Implementing the merger with yA Bank strengthened our capital position since our regulatory capital requirements were reduced by about one percentage point. We also signed forward flow agreements with three credit management companies, enabling them to recover some of our delinquent receivables, starting from January 2019. Selling the receivables will accelerate the cash flow, thus reducing our risk exposure. The transfers positively impact our capital and liquidity situation.

In November, we also launched a deposit offering in Germany in collaboration with Raisin, the largest deposit platform in the German market. With deposits in EUR, we are taking a further step toward even more diversified and strengthened financing.

Overall, the second half of the year marked a strong end to 2018 with profitable growth, continued development of innovative solutions and a strengthened capital position. But none of this would be possible without our employees, whose skills and commitment contribute to our success every day. All in all, we are in a strong position to continue our profitable growth in 2019.

About Resurs Bank:Resurs us a Nordic niche bank that offers leading payment and financing solutions for the retail industry and its customers. We help companies and private individuals with lending, saving and payments. With more than 40 years of experience in the retail sector, we make shopping online and in stores quick, easy and secure. We focus on the customer experience and make good things happen and the hard feel easier. We have about 5.9 million private customers and more than 700 employees in the Nordics. When we use the term “Group” in this report, we are referring to the Resurs Bank Group.

* Certain performance measures provided in this section have not been prepared in accordance with IFRS or the capital adequacy rules, meaning that they are alternative performance measures. Calculations and reconciliation against information in the financial statements of these performance measures are provided on the website under “Financial information.” Definitions of performance measures are provided on page 28. The figures in parentheses refer to 31 December 2017 in terms of financial position, and to the year-earlier period in terms of profit/loss items.